Consider Near- and Long-Term Issues Before Implementing CARES Act Provisions


Congress has passed several new laws intended to provide relief to workers, support for small businesses and other employers, and equipment and funds for hospitals and health care professionals. The Coronavirus Aid, Relief and Economic Security (CARES) Act is the largest of these measures, providing not only $2 trillion in various types of relief, but also several temporary retirement plan provisions providing emergency access to retirement savings. These new options are not mandatory—each plan sponsor must decide for itself whether to adopt the new loan or distribution provisions based on its own situation and the needs of its own workforce.

For many plans, separation from employment results in the need to repay any outstanding loans. Plan sponsors should consider changing their loan policy to allow for continuation of loan repayment after separation of employment. They may also want to explore other options to build a “safety net” for their most financially at-risk employees and participants to protect them from loan defaults following layoffs, such as including automated loan insurance in a loan program. These options may be available from recordkeepers already.

Read the PLANSPONSOR article by Bradford Campbell, former Assistant Secretary of Labor, partner at Faegre Drinker Biddle & Reath LLP, and a member of Custodia Financial’s Strategic Advisory Council.